UAE SCA to announce final draft for crypto asset regulation in weeks
Updated: Jan 5
During the recent webinar entitled, “Financial markets post Covid-19, spotlight UAE and MENA” hosted by Black Mata Capital Partners, Mr. James Bernard, Head of Corporate Sales at DMCC (Dubai Multi Commodities Center) which adheres to regulations from United Arab Emirates SCA ( UAE Securities and Commodities Authority) stated, “ In the next few weeks the SCA who regulates mainland financial and non-financial entities as well as DMCC as we operate a securities derivatives exchange, will be launching final draft of the crypto asset and security token legislation.”
SCA UAE had launched its consultation paper on the crypto assets legislation in 2019. James added, “We are working closely with UAE SCA on this as DMCC is a licensing authority and over the years we have been building the cryptographic ecosystem. Most recently we have partnered with CV Labs who developed the crypto ecosystem in Switzerland and we are now working with them on developing this in AlMas tower in DMCC which will include incubators, accelerators, training and mentoring as well as licensing activities.”
The licenses to be offered in DMCC will include promotion and offering of crypto assets, crypto custody services, fund raising crypto exchanges, and more.
The statement made by James, came as part of the discussion on tokenization in the region specifically in UAE and GCC. The panel on the webinar included, Christian Platzer Founder and CEO of Black Manta Capital Partners), Kokila Alagh, Founder and CEO of KARM Legal, Saeed Hareb Al Darmaki, Founder of Alphabit Digital Currency Fund and eGovern, Mohammed Mahfoudh, Founder of DECA4 and Mr. James Bernard, Head of Corporate Sales at DMCC.
According to Kokila Alagh from Karm Legal, “We are now in the midst of change and the right time for tokenization. Regulators in the region have moved forward whether in UAE or KSA as part of the governmental visions of these countries. Even though it has taken time today the ecosystem is ready, this includes various service providers, regulations, sandboxes, and for the first time a local ecosystem that has developed.”
As for which sectors will see tokenization off assets first, Saeed Al Darmaki explains, “With regards to tokenization of securities and commodities technology is an enabler and we are confident of the growth and I wouldn’t be surprised to see the first tokenization of assets come from Emaar, UAE’s biggest developer, for either new developments or existing properties. So in general I see real-estate as benefiting from tokenization.”
Mohamed Mahfoudh from Deca4 is also confident of the flourishing of tokenization in the UAE. He explains, “ While in more developed countries that have a strong traditions financial market such as London and NewYork, things will move more incrementally, but here in the region we have a change to jump and leap frog as it is easier to establish new markets and frameworks especially since UAE government is pushing for innovation. I believe startups can really benefit from the tokenization of secrurities and provide quicker exits, liquidity, cashflow, etc.. I also agree that realestate will benefit as it has been a very illiquid sector and tokenization can resolve this. We also see this happening in realestate especially with the passing of fractional ownership regulations, and we have seen regulators move faster than local entities.”
Alagh reiterates that the UAE SCA has been working diligently on the crypto asset and security token legislation with DMCC. She explains, “ As KARM legal we have closely followed the work being carried out by UAE SCA as well as those being done by Abu Dhabi ADGM ( Abu Dhabi Global Markets) DFSA, DIFC ad others in terms of development of sandbox environments and we see specific growth in crowd funding platform, security token offerings. Regulators are well advanced on these new technologies and as long as AML, KYC, privacy, and data protection measures are in place they are ready and open to allowing anyone to work in this space.”
Christian platzer believes that once all players are in place tokenization will grow and reach the masses. He states, “Today we have a lot of software companies developing tokenization engines, and less is developing security token exchanges. So while we have a lot of secondary market exchanges, we still lack primary markets or multilateral trading facilities and security token custodians. Once we see more of them this will empower professional investors and then after we will go in to mass adoption which is a couple of years down the road.”
All attendees believe the future is ripe and bright for tokenization in the MENA region and that it will benefit the economic sectors as well as startups and innovation efforts moving forward.